M.M. INTERVIEW: CALIFORNIA AG DEFENDS MORTGAGE DEAL - M.M. spoke with California Attorney General Kamala Harris, a rising star in the Democratic Party, about criticism from the left that the $26 billion mortgage servicer settlement isn’t big enough to make a difference in the housing market and doesn’t do enough to punish banks: “We have preserved our ability to do securities fraud claims ... We have maintained our ability to continue criminal investigations of false claims - have a strong False Claims Act in California - as well as bring civil rights actions ...We got $18 billion for California and we tore up a blank check of immunity. I declare that a success for this piece of it.

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“But this is only part of our broader focus. ... The longer lasting impact will come through legislative reforms ... I’ve called on [FHFA Acting Director Edward] DeMarco step aside [over his resistance to principal reduction.] Principal reductions are imperative. If he can’t understand that’s an essential principle he should step aside.” ...

Harris said she held out for so long in large part to guarantee strong enforcement mechanisms in the deal: “[The delay] was about our ability to enforce promises ... Those details were very important to us. The bigger points were in contention earlier, the principal reductions and relief for homeowners. But we were burned by our experience with Countrywide and the lesson for me is that we like to trust promises but we have to have the ability to enforce them.”

GOLDMAN IS NOT BULLISH ON VOLCKER - Much was made of comments from Goldman Sachs chief financial officer David Viniar at a conference in Florida in which he seemed to suggest that the Volcker Rule ban on proprietary trading would be beneficial because it would result in a less capital intensive model, thus boosting return on equity. People close to the firm say the comments were truncated and misconstrued. They note that Goldman on Monday will send a 50-page letter to regulators making the case for why the Volcker Rule is possibly damaging to markets.

A person close to Goldman said Viniar was simply saying the firm would need less capital if it was doing less business. More from Viniar at the conference in which he criticized the Volcker Rule: “And the same thing with lots of businesses that we do, if you want something from us, and we can't have it, we're going to have to go source it for you, and so you could see bid-offer spreads widen pretty dramatically in the market. And that will, I think, be bad for all of our clients and be bad for the general markets and for free flow of capital.”

BARNIER WARNS ON VOLCKER - Michel Barnier, the European Commissioner for Internal Market and Services, writes in letter to U.S. regulators: “[T]the proposed regulation raises ... a number of concerns and would appear to have implications that are disproportionate in light of the objective that the rule is trying to achieve. First of all, the draft rules as presented have an extensive, global scope. This would seem to lead to a number of unintended, non justifiable consequences for non-US banks, markets and institutions. ... [T]he current exemption for non-US banks as well as for activities outside of the US would appear very restrictive. As a consequence, it would appear that the rule would be applied well beyond the US activities of non-US banks, without any justification being provided. ...

“[T]he rule could have significant ramifications for financial markets outside the US, in particular if some of its elements lead to uncertainty for financial intermediaries. This not only relates to proprietary trading outside the United States, but also to market making. ... [T]here is a real risk that banks impacted by the rule would also significantly reduce their market making activities, reducing liquidity in many markets both within and outside the United States.”

GREEK DRAMA CONTINUES - FT’s Joshua Chaffin and Alex Barker in Brussels, Ralph Atkins in Frankfurt and Kerin Hope in Athens in the page 1 splash: “Eurozone finance ministers dismissed as incomplete a reputed €3.3bn package of Greek budget cuts presented to them in the hope of securing a new €130bn bail-out and sent the country’s finance minister back to Athens with a fresh set of demands and an urgent deadline. In exchange for signing off on the loan, which Greece is depending on to avoid a potentially chaotic default next month, its lenders are demanding €325m in further cuts to this year’s budget ...

“They also warned of more intensive involvement in the Greek economy to improve tax collection and accelerate the sale of state-owned assets. ... The reception in Brussels marked a sharp contrast from the near-euphoria with which Greece’s political leaders presented the deal earlier in the day that they billed as the solution to weeks of market-rattling brinkmanship.” http://on.ft.com/ykvi05

GINGRICH LOOKS FOR NEW ADELSONS - Bloomberg’s Julie Bykowicz: “For now, the Adelsons don’t plan to deliver another big check to float Gingrich’s campaign, according to a person familiar with their deliberations. The family has donated a combined $11 million to Gingrich’s super-PAC in the past two months, according to interviews and Federal Election Commission records. An Adelson spokesman declined to comment.” http://bloom.bg/w6Elft

LEFT WARY OF MORTGAGE DEAL - POLITICO’s Joseph Williams: “The remaining liberal skeptics include Elizabeth Warren ... ‘It needs to be the beginning, not the end of efforts to hold the big banks accountable with meaningful penalties that demonstrate the rules and the law apply to everyone,’ said Warren ... ‘Moving forward, further investigation and prosecution are needed to bring our long national mortgage nightmare to an end.’ Dean Baker, a liberal economist, said the settlement agreement ‘doesn’t accomplish much’ to help homeowners. Critics have complained that the deal is too small to give meaningful help to distressed homeowners ... But they stressed that the settlement is narrowly focused on foreclosure malfeasance only and doesn’t preclude additional settlements, lawsuits or criminal penalties.” http://bit.ly/zaAICr

BANK STOCK IMPACT: NOT MUCH - From Keefe, Bruyette & Woods: “While we in no way want to equate tobacco companies with banks, we looked at tobacco company stock performance going into and out of the 1998 settlement to discern any trends ... We found that tobacco stocks performed well going into the announcement, performed in line with the market on the day of the announcement, and underperformed in the months following the settlement. ... In our opinion, sufficient reserves have been set aside for the settlement impact, and estimate revisions should be minimal once final deal terms are released and incorporated into company earnings estimates.”

HOT THIS MORNING: TNR’S SCHEIBER ON DEBT CEILING DEBACLE - The New Republic’s Noam Scheiber has a big piece up this morning on the debt ceiling meltdown as a window into the Obama presidency. It’s adapted from his forthcoming book “The Escape Artists: How Obama’s Team Fumbled the Recovery.” On the failed effort to engage Speaker John Boehner on a grand bargain deficit reduction deal: “For most of July, Obama and Boehner went back and forth at frequent intervals. But while the buzz of activity mimicked a high-stakes negotiation, there was never anything to show for it.

“At one point, over the July Fourth weekend, the president called back his entire economic team from vacation because it looked as if the talks were ripening. By the following weekend, Boehner’s office went silent with no explanation. Sperling began cracking that he “wouldn’t want to date these guys. They leave without having the ‘can we see other people’ conversation.” After a few weeks of this routine, it was blindingly obvious that Boehner wouldn’t be bringing conservatives with him on any deal involving taxes.” http://bit.ly/wSL6Za

GOOD FRIDAY MORNING - M.M. is back on MSNBC’s “NOW with Alex Wagner” at noon. Guests include The New Yorker’s Ryan Lizza. ... In today’s kicker item: Boston Globe fronts a story about banks charging you to close your account.

DRIVING THE DAY - Mitt Romney is the big headliner at the conservative CPAC conference in Washington, the same place he ended his campaign four years ago. Romney, who speaks at 12:55 p.m., clearly has not yet won over the conservative base so he needs a very strong performance. ... Newt Gingrich also speaks at CPAC and will be introduced by third wife Callista Gingrich who rarely utters any words on the campaign trail ... Rick Santorum speaks before Romney; Gingrich speaks after him. ... International trade data out at 8:30 a.m. expected to show a slight increase in the deficit to $48.5 billion ... Univ. of Michigan consumer sentiment expected to tick down to 74.0 from 75.0, though some believe expectations are too low ... Treasury budget out at 2:00 p.m. expected to show a January deficit of $48.5 billion, up from $47.8 billion last year. CBO however pegs the number at only $27 billion, per HFE.

ALSO TODAY: DELOITTE WEBCAST ON FACTA - Per Deloitte official: “Deloitte will be holding a client webcast t12 p.m. EST focusing on the U.S. Treasury and IRS’ proposed guidance on the Foreign Account Tax Compliance Act (FATCA). Beginning in January 2013, FATCA requires U.S. and foreign financial institutions to annually identify and report their U.S. account holders. ... During the 90-minute call - which will feature Michael Plowgian from the Treasury - we’ll focus on the steps any impacted organization should be thinking through in addressing FATCA compliance.” http://bit.ly/y90kR5.

DEMS PUSH FOR PRINCIPAL REDUCTION - Reps. Elijah Cummings (D-Md.) and John Tierney (D-Mass.) wrote to FHFA Acting Director Edward DeMarco pushing him to pursue significant principal reduction which they say would “serve taxpayer interests more effectively than any other alternative.” Full letter: http://bit.ly/zVM7Sy

GETTING IT STRAIGHT ON UNEMPLOYMENT RATE - NYT’s indispensible Floyd Norris explodes the annoyingly persistent yet factually bogus argument that the January jobs number showed more people dropping out of the labor force: “More than a little commentary on last week’s employment report asserts that the apparent good news came from people dropping out ... and thereby not being counted as unemployed. ... Those making that claim have not read what [BLS] had to say. ... [P]reviously discouraged workers seem to be entering the labor force and looking for jobs. ... Each January the bureau updates its population estimates, and this update was particularly large because it had a new census to use. The policy is to not revise the earlier unemployment survey numbers, so sometimes there are big apparent changes that are not actually there. That is what happened in January. ... The reality, the government says, is that the number of people not in the labor force fell by 75,000 people.” http://nyti.ms/yDTgvz

TOP TALKER: BACHUS TRADES PROBED - WP’s Scott Higham and Dan Keating: “The Office of Congressional Ethics is investigating the chairman of the House Financial Services Committee over possible violations of insider-trading laws, according to individuals familiar with the case. Rep. Spencer Bachus (R-Ala.) ... has been a frequent trader on Capitol Hill, buying stock options while overseeing the nation’s banking and financial services industries. The Office of Congressional Ethics ... opened its probe late last year after focusing on numerous suspicious trades on Bachus’s annual financial disclosure forms, the individuals said. OCE investigators have notified Bachus that he is under investigation and that they have found probable cause to believe insider-trading violations have occurred.

“The case is the first of its kind involving a member of Congress. It comes at a time of intense public scrutiny of congressional ethics, with the House passing legislation Thursday to tighten rules against insider trading by lawmakers. ... ‘The Office of Congressional Ethics has requested information and I welcome this opportunity to present the facts and set the record straight,’ Bachus said in a statement issued Thursday by his spokesman, Tim Johnson. ... The [OCE] also is investigating whether Bachus violated congressional rules that prohibit members of Congress from using their public positions for private gain.” http://wapo.st/ApCgbX

MORTGAGE DEAL FLY AROUND -

HOPES RISE FOR ECON BOOST - WSJ’s Nick Timiraos and Ruth Simon on pg. A1: “The ... settlement ... will provide financial relief to an estimated one million at-risk borrowers, raising new hopes for an economy still hurting from the mortgage bust. ... The largest portion of the aid, valued at $17 billion, goes to borrowers at risk of foreclosure. While the deal won't be a cure-all for the housing market ... the settlement also includes a provision that will let some homeowners who are current on payments refinance mortgages even though they owe more than their homes are worth. ...

But the devil could be in the details of the long-awaited deal. The exact wording hadn't been fully settled even as the deal was publicized. Likely pressure points include the scope of the potential legal claims the states have surrendered in certain areas where they have agreed not to sue the banks, and how banks will satisfy various terms requiring them to help troubled housing markets.” http://on.wsj.com/yPlEIT

OR MAYBE NO BOOST? - NYT’s Nelson D. Schwartz and Julie Creswell on pg. B1: “Economists do not expect a big boost for the economy, in part because the banks have three years to distribute the aid. Some experts questioned whether the accord would do much to stabilize the housing market and its glut of millions of foreclosed homes. Critics also pointed to the fact that millions of mortgages owned by the government’s housing finance agencies, Fannie Mae and Freddie Mac, would not be covered ... Homeowners in two states — Florida and California — will reap more than half of the $26 billion settlement, a reflection of the disproportionate number of loans that are delinquent or exceed the value of the underlying property there, government regulators said. The amounts from individual banks were linked to their share of the servicing market. The biggest, Bank of America, would provide $11.8 billion, followed by $5.4 billion from Wells Fargo, $5.3 billion from JPMorgan Chase, $2.2 billion from Citigroup and $310 million from Ally.: http://nyti.ms/y8EBbH

VERY LIMITED IMMUNITY - Reuters’ Felix Salmon: “The biggest worry was that the attorneys general would give away the shop in return for big headlines. While in fact they seem to have been quite successful at limiting the immunity that the five banks ... are going to receive: In the agreement’s expected final form, the releases are mostly limited to the foreclosure process, like the eviction of homeowners after only a cursory examination of documents, a practice known as robo-signing. The prosecutors and regulators still have the right to investigate other elements that contributed to the housing bubble ... If you’re a bank shareholder breathing a sigh of relief, then, don’t. The only thing you’re protected against, now, is lawsuits over robosigning. Were those likely to cost $25 billion if they had gone to court? It seems unlikely to me that they could have raised that much.” http://reut.rs/zCIKaY

NOT A HUGE NUMBER - Slate’s Matthew Yglesias: “I don't want to be the kind of guy who sniffs at a $26 billion settlement, but the reality is that's a relatively small amount of money. It's small relative to the $250 billion (nominal) tobacco settlement from the late 1990s. Some federal officials say the real number is closer to $39 billion, but even if so that's a relatively small amount. Certainly it's small relative to the $700 billion in total underwater mortgage debt outstanding in the United States. ... Private rights of action about foreclosure fraud remain intact. So rather than settling the whole thing, the banks have settled some large piece of the thing. The best news for them, legally speaking, is that this cuts off some further lines of investigation.” http://slate.me/ycNvBj

MORE HEADACHES FOR BANKS - LATimes’ Nathaniel Popper and E. Scott Reckard: “A nationwide settlement on foreclosure practices has ended one headache for the banks involved, but there are signs that it is only the beginning of many others. ... Until recently, analysts thought this might put to rest many of the largest complaints about the role the banks played in the financial crisis and its aftermath. It hasn't. There are a growing number of signals that prosecutors and regulators are stepping up efforts to bring new lawsuits and criminal charges in connection with the crisis. ... What's more, there is no criminal immunity or release from private claims by individuals or class-action lawsuits.” http://lat.ms/x4X4D5

OBAMA ECON NUMBERS RISE - Gallup’s Lydia Saad: “By 59% to 38%, more Americans continue to disapprove than approve of President Barack Obama's handling of the economy. However, his approval rating on the economy is up from 30% in November after descending to a term-low 26% in August. ... Still, Obama's rating on the economy continues to be one of his poorest issue evaluations from Americans -- on par this month with his handling of foreign trade, relations with China, and creating jobs. Of the 11 issues on which Americans rated his performance in the Feb. 2-5 Gallup poll, only his rating on the federal budget deficit came in lower, at 32%. The president's highest issue approval ratings -- all near 50% -- are for the environment, national defense, Afghanistan, and foreign affairs generally.” http://bit.ly/vZsPjg

ALSO FOR YOUR RADAR -

PAYROLL TAX: TICK TOCK - POLITICO’s Jake Sherman and Seng Min Kim: “Taxes are set to go up on 160 million Americans in a few weeks. But there’s little sign of urgency — let alone progress — coming out of Washington. House lawmakers dashed out of town Thursday for a four-day weekend, but not before engaging in another round of sniping. Meanwhile, the clock continued to tick toward the end-of-month expiration ... Democrats formally rejected two GOP measures to rework unemployment insurance - provisions that Republicans say are needed to gain their support to extend the tax credit.

“One tweak would force people who receive unemployment benefits to be enrolled in a GED program, another would allow states to require drug testing for recipients. ... The posturing has some onlookers unnerved. Aides in both chambers are looking at the calendar with great concern. Congress will be out of session for a week beginning Feb. 20 - just a few days before the tax cut is slated to expire. The general consensus is that next week needs to yield an agreement.” http://bit.ly/AdlbJV

IRS TWEAKS 1099K RULE - In response to concerns from retailers, the changed policy and will no longer require merchants to track and report gross debit and credit card receipts. From the IRS letter: “Our intention is that the reporting of gross receipts and sales on the 2012 income tax forms will be modeled on the 2010 income tax forms.” IRS letter: http://bit.ly/yWXvXd; RILA letter: http://bit.ly/x8TWhG

ECB RUNS INTO GERMAN RESISTANCE - FT’s Ralph Atkins in Frankfurt and Mary Watkins in London: “Mario Draghi has run into Bundesbank resistance over easing access to [ECB] offers of three-year liquidity for eurozone banks, highlighting German unease over the measures the ECB president has taken to turn the region’s fortunes. The ECB’s 23-strong governing council gave the go-ahead on Thursday for seven national central banks to expand the assets that can be used as collateral when obtaining liquidity. ... However, Jens Weidmann, Bundesbank president, voiced concern about a lowering of credit standards and Mr Draghi admitted the council decision had not been unanimous. The Bundesbank’s concern is significant because Mr Draghi has tried to repair the damage created by conflicts with sceptical German policymakers over eurozone crisis measures under Jean-Claude Trichet, his predecessor.” http://on.ft.com/z84skO

BANK FEE OUTRAGE: PAY TO CLOSE YOUR ACCOUNT - Boston Globe’s Todd Wallack on pg. A1: “Upset about bank fees? Want to close your bank account? No problem, your bank says. Just one catch: There may be a fee for that. Many banks across the country, including several in Massachusetts, are charging customers if they close a checking or savings account within several months of opening it. Boston-based Sovereign Bank, Citibank, PNC Bank, and U.S. Bank charge $25. Some smaller financial institutions demand up to $50 to close an account. The fees, while not new, are attracting more scrutiny from consumers, lawmakers, and regulators as customers have become more aware and increasingly disenchanted with new and higher fees imposed by banks.” http://b.globe.com/wBy9zf

About The Author

Ben White is POLITICO Pro's chief economic correspondent and author of the “Morning Money” column covering the nexus of finance and public policy.

Prior to joining POLITICO in the fall of 2009, Mr. White served as a Wall Street reporter for the New York Times, where he shared a Society of Business Editors and Writers award for breaking news coverage of the financial crisis.

From 2005 to 2007, White was Wall Street correspondent and U.S. Banking Editor at the Financial Times.

White worked at the Washington Post for nine years before joining the FT. He served as national political researcher and research assistant to columnist David S. Broder and later as Wall Street correspondent.

White, a 1994 graduate of Kenyon College, has two sons and lives in New York City.